Nov 8, 2019

Investment safe havens unwind amid hope of U.S.-China trade war truce

Data: Investing.com; Chart: Axios Visuals

The dollar rose to its highest level in five weeks against the Japanese yen on Thursday, as currency markets also took their cue from seemingly reduced tensions between the U.S. and China.

The state of play: The yen's value against the dollar has declined along with gold, bond prices, and other safe havens this week as the world's two largest economies look poised to roll back tariffs and de-escalate the trade war.

What they're saying: "[F]or now the latest headlines suggest progress towards a meaningful agreement, which is enough to boost risk appetite," Kathy Lien, managing director of FX strategy at BK Asset Management, says in a note to clients.

What to watch: Lien points out that "the restrained rally" in currencies like the Australian and New Zealand dollars that typically perform well when investors favor risky assets, "reflect the market's cautiousness in this headline driven market."

  • "Barring any fresh news that could cast doubt on progress towards a deal, [the dollar] could extend its gains to 110 [yen per dollar]."

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Why it matters: The decline may continue, reducing the dollar's strength in 2020, experts say.

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Dollar Tree says the U.S.-China trade war will cost it $19 million in Q4

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Treasury selloff is more about the Fed than the trade deal

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Why it matters: The Treasury market has provided a more accurate reflection of U.S. economic data so far this year, and rising yields show safe-haven bonds are losing their appeal.

Go deeperArrowNov 12, 2019